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Originally published in Volkswagen Group’s Shift Magazine 2017.
Reproduced with the kind permission of VW Group.

Is Corporate Social Responsibility an illusion?

Between Ambition and Reality

In the aftermath of the ‘Dieselgate’ emissions scandal, Volkswagen group has gone to great lengths to rebuild its reputation and direction. The Volkswagen Group is now committed to becoming a role model for environment, safety and integrity in the future, pursuing sustainable growth. But how sustainable is this strategy? And how do you prove it?

In this interview, Bjørn Otto Sverdrup and Prof. Dr. Gerhard Prätorius discussed these questions with Dr. Elmer Lenzen, publisher of the Global Compact International Yearbook.

Dr. Elmer Lenzen: Peer Gynt is a farmer boy who tries to escape from reality by inventing his own realities. A cynic would say: ‘That sounds like CSR management in big companies.’ What characterises good corporate sustainability for you?

Bjørn OttoSverdrup: To me, it means navigating the relationship between the company and society—and nature. Good sustainability officers are change agents, they are concerned about actual performance, and they work very closely with the long-term strategic agenda of their companies.

Prof. Dr. Gerhard Prätorius: Two years ago, I would have answered that a company with a strong sustainability department, deep-rooted values and a good performance concerning social aspects—all that Volkswagen stood for—had a good basis for corporate sustainability. The big shock came with the diesel scandal.

Prätorius: People tend to get complacent after a long period of success. Our business was very successful, and it still is. And that does not necessarily foster openness to change. The crisis can now help accelerate the necessary change.

Sverdrup: Some people say, “never waste a good crisis!”

Prätorius: Good and secure jobs are traditionally just as important to Volkswagen as economic success—this also guides us during the process of transformation. In our factory in Kassel, today there are 17,000 employees producing gear boxes. They will produce electric engines in the future as the demand for gear boxes declines. This is how we try to balance ecological requirements and job security on the path to economic success.

Lenzen: The former United Nations Secretary-General Kofi Annan said: “Do you need to do your normal business differently?”

We are now working on topics that would have been impossible to discuss in this way before the diesel crisis.

Gerhard Prätorius, Head of Sustainability at Volkswagen AG

Sverdrup: It is about constantly asking yourself: can you do better? Our sustainability strategy aims to build resilience, which means to be flexible, adaptable, grounded and connected with our stakeholders.

Lenzen: Our system is built on the idea of bigger, faster, farther. Can growth be sustainable at all?

Prätorius: I cannot imagine that in an innovation and market-driven economy we could follow a negative growth strategy. But we can decouple economic development from the use of resources and energy. This is what you call innovation. Especially in with the combination of digitalisation and sustainability, I see new opportunities.

Lenzen: How do you bring such ideas into the company?

Prätorius: It doesn’t happen without a strategy. Then you have to define the right goals, KPIs and management practices. As sustainability officer, you should, however, never forget that you are a forerunner. You have to get your colleagues on board and openly address conflicting interests early on.

Sverdrup: Our team is part of the strategy unit. We have embedded climate and environmental issues in all decision-making processes. We measure performance the same way we measure costs and earnings. This way, soft issues have become hard realities.

From time to time, shifts are necessary. They are a sign of vitality.

Bjørn Otto Sverdrup, Senior Vice President of Sustainability at the Norwegian oil and gas company, Equinor

Lenzen: What figures are we talking about? And what makes you confident that these indicators are appropriate?

Prätorius. We use recognized environmental KPIs and, on the basis of the new strategy, we are working on a decarbonization index. In addition, we are introducing a diversity indicator. With these steps, our new strategy has the potential to be a sustainable strategy.

Sverdrup: At Equinor, one out of five KPIs is related to climate and sustainability. For example, energy efficiency, or CO2 per barrel produced. But we also have KPIs for measuring growth in other areas, making sure to shift the capital in time, like investing in renewables and promoting what we think will contribute to long-term success.

Lenzen: One instrument you use at Equinor is an internal carbon price.

Sverdrup: Yes, we believe that you need to show the cost of CO2. So, whenever we make investment decisions, we put a price tag on CO2. That means that CO2-intensive projects become less attractive as investments. At the same time, it stimulates environmental technology and makes it more profitable.

Prätorius: Yes, with an adapted design, that could be a driver for further transformation.

Lenzen: How do you make sure that profit targets do not override sustainability?

Sverdrup (laughing): Our voice is heard, but there is never just one way to improve a company. It is really about finding the right balance, because you cannot have everything. But it’s true: if you find a sustainability officer who is happy with everything, he or she is probably not ambitious enough.

Prätorius: You have to make sure that you are part of the usual day-to-day business, but also have a good feel for new developments and are creative in dealing with them.

Lenzen: What is the role of investors?

Sverdrup: I met an investor who said, ‘I am a long-term investor in Equinor. I asked him how long he usually holds a stock. He said, ‘three weeks.’ I think, however, the G20 have worked to raise the awareness among investors, in particular on climate-related issues.

Prätorius: Particularly for investors, we have to try to measure sustainability. But there are limits to measurement, of course. This is why I think we also need a convincing narrative for the transformation.

Related pages:

Climate and corporate social responsibility are more important than ever before. Read more about Equinor and climate here:

In this article for Norwegian national daily Aftenposten, Equinor CEO Eldar Sætre explains how the company is putting its weight behind the Paris Agreement and seizing the opportunities presented by changes in global energy markets.